Board attributes and external audit firm choice of Nigerian Non-financial Firms

2021 ◽  
Vol 39 (2) ◽  
Author(s):  
Sanyaolu Wasiu Abiodun ◽  
Animasau Rasheed Olatunji
Keyword(s):  
Audit Quality ◽  
Gender Diversity ◽  
Sampling Technique ◽  
Study Data ◽  
Manufacturing Companies ◽  
Audit Firm ◽  
Financial Firms ◽  
Big 4 ◽  
Audit Firms

The paper examined the influence of boards attributes and audit firm choice of Nigerian listed non-financial firms. In an attempt to achieve the objective of this study, data of 21 sampled manufacturing companies were obtained from 2012 to 2017 using purposive sampling technique. Data for the sampled companies were analysed using logit regression analysis.  The result of the study provides evidence for significant influence of board independence, gender diversity and board meetings on audit firm choice while it board size was found to exert positive but no significant effect on audit firm choice. Arising from this, the study recommends that the non-executive directors should be dominated by directors with adequate level of financial directors that will propel them towards appreciating audit quality while choosing audit firm so as to improve quality of audit work. Also, firm should also seek to know whether audit quality of big 4 audit firms always supersedes that of their non-big 4 counterparts.

Board attributes and external audit firm choice of Nigerian Non-financial Firms

2021 ◽  
Vol 39 (1) ◽  
Author(s):  
Sanyaolu Wasiu Abiodun ◽  
Animasau Rasheed Olatunji
Keyword(s):  
Audit Quality ◽  
Gender Diversity ◽  
Sampling Technique ◽  
Study Data ◽  
Manufacturing Companies ◽  
Audit Firm ◽  
Financial Firms ◽  
Big 4 ◽  
Audit Firms

The paper examined the influence of boards attributes and audit firm choice of Nigerian listed non-financial firms. In an attempt to achieve the objective of this study, data of 21 sampled manufacturing companies were obtained from 2012 to 2017 using purposive sampling technique. Data for the sampled companies were analysed using logit regression analysis.  The result of the study provides evidence for significant influence of board independence, gender diversity and board meetings on audit firm choice while it board size was found to exert positive but no significant effect on audit firm choice. Arising from this, the study recommends that the non-executive directors should be dominated by directors with adequate level of financial directors that will propel them towards appreciating audit quality while choosing audit firm so as to improve quality of audit work. Also, firm should also seek to know whether audit quality of big 4 audit firms always supersedes that of their non-big 4 counterparts.

Should PCAOB Disciplinary Proceedings Be Made Public? Evidence from Sanctions against a Big 4 Auditor

2012 ◽  
Vol 6 (2) ◽  
pp. P18-P24 ◽  
Author(s):  
Carol Callaway Dee ◽  
Ayalew Lulseged ◽  
Tianming Zhang
Keyword(s):  
Stock Prices ◽  
Stock Price ◽  
Audit Quality ◽  
Financial Statements ◽  
Audit Firm ◽  
Stock Market Reaction ◽  
Big 4 ◽  
Audit Firms ◽  
Price Effects

SUMMARY: In our paper “Client Stock Market Reaction to PCAOB Sanctions against a Big 4 Auditor” (Dee et al. 2011), we examine stock price effects for clients of a Big 4 audit firm when news of sanctions imposed by the PCAOB against the audit firm was made public. These PCAOB penalties were the first against a Big 4 auditor, and they revealed information about quality-control problems at the audit firm that were not publicly known until the sanctions were announced. Our analysis of stock prices suggests that investors in clients of the penalized Big 4 firm reevaluated their perceptions of the quality of the firm's audit work after learning of the sanctions. The negative stock price effects for the firm's clients were consistent with investors inferring that the financial statements were of lower quality. In the paper, we conclude that investors find information about PCAOB sanctions against audit firms to be relevant in assessing audit quality and use that information in setting stock prices for audit firms' clients. This finding has relevance for the debate on the proposed legislation in Congress (H.R. 3503), which would allow the PCAOB to disclose proceedings against auditors before the investigations are concluded. Our results suggest that, although investors may find early disclosure of this information useful, public disclosure of Board disciplinary proceedings before they are completed could unfairly harm an audit firm's reputation if the firm is ultimately vindicated of wrongdoing.

scholarly journals ECONOMETRIC APPRAISAL OF AUDITORS’ INDEPENDENT CHARACTERISTICS AND AUDIT QUALITY OF DEPOSIT MONEY BANKS IN NIGERIA

2015 ◽  
pp. 66-81
Author(s):  
Sabo Ahmed ◽  
Alfred Kwanti
Keyword(s):  
Audit Quality ◽  
Stock Exchange ◽  
Secondary Data ◽  
Sampling Technique ◽  
Audit Fees ◽  
Financial Reports ◽  
Audit Firm ◽  
Audit Firms ◽  
Audit Reports

The study examines the characteristics of auditor’s independence on audit quality of Deposit Money Banks (DMBs) listed on the Nigerian Stock Exchange (NSE) from 2010 to 2019. A sample size of seven Deposit Money Banks was selected using the purposive sampling technique. The study used secondary data, sourced from the audited annual financial reports of the sampled banks. The analysis of the data was done using descriptive statistics, correlation matrix, and panel regression technique. The findings reveal that audit independence and audit firm rotation are positively related to audit quality, whereas audit firm tenure relates negatively to audit quality. The relationship between audit fees and audit quality is positively insignificant. The study recommends that audit firms are to be rotated after three years of service so as to avoid over-familiarity that may jeopardize the quality of audit reports. Also, the regulatory bodies should commence the enforcement of the three years audit tenure requirement proposed by stakeholders to forestall lengthy auditor/client relationship.

Audit Office Labor Market Proximity and Audit Quality

2021 ◽  
Author(s):  
Gladys Lee ◽  
Vic Naiker ◽  
Christopher R Stewart
Keyword(s):  
Labor Market ◽  
Audit Quality ◽  
Financial Accounting ◽  
Audit Firm ◽  
Big 4 ◽  
Audit Firms ◽  
Sensitivity Tests ◽  
Alternative Measures ◽  
Office Level

This study examines whether the audit quality of Big 4 audit firms is affected by an audit office's proximity to more target universities for appointing staff auditors. We identify these target universities using a recruitment map of a Big 4 audit firm and unique office-level hiring data hand collected from LinkedIn. Our findings suggest that audit offices closer to more of their key feeder schools and universities with accredited business schools are associated with higher audit quality, as observed by a lower likelihood of financial accounting misstatements. Our results are robust across alternative measures of labor market proximity and audit quality, and to a battery of sensitivity tests, including controlling for client firm's proximity to universities. Overall, our results suggest that audit offices benefit from being proximate to more key suppliers of staff auditors.

An Empirical Investigation of IPO Underpricing and the Change to the LLP Organization of Audit Firms

2004 ◽  
Vol 23 (1) ◽  
pp. 53-67 ◽  
Author(s):  
Steven R. Muzatko ◽  
Karla M. Johnstone ◽  
Brian W. Mayhew ◽  
Larry E. Rittenberg
Keyword(s):  
Initial Public Offering ◽  
Audit Quality ◽  
Limited Liability ◽  
Litigation Risk ◽  
Ipo Underpricing ◽  
Audit Firm ◽  
Legal Structure ◽  
Audit Firms ◽  
Public Offering

This paper examines the relationship between the 1994 change in audit firm legal structure from general partnerships to limited liability partnerships (LLPs) on underpricing in the initial public offering (IPO) market. The change in legal structure of audit firms reduces an audit firm's wealth at risk from litigation damages and reduces the incentives for intrafirm monitoring by partners within an audit firm. Prior research suggests that underpricing protects underwriters from litigation damages, and that the level of underpricing varies inversely with both the amount of implicit insurance provided by the audit firm and the quality of the audit services provided. We hypothesize the change in audit firm legal structure reduced the assets available from audit firms in IPO-related litigation and indirectly reduced audit quality by lowering intrafirm monitoring. As a result, underwriters have incentives as a joint and several defendant with the audit firms to increase IPO underpricing, particularly for high-litigation-risk IPOs, following audit firms' shifts to LLP status. Our findings are consistent with this hypothesis.

scholarly journals FAR Research Project: The loss of talent: a threat for audit quality?

2017 ◽  
Vol 91 (9/10) ◽  
pp. 268-273
Author(s):  
Isabella Grabner ◽  
Judith Künneke ◽  
Frank Moers
Keyword(s):  
Audit Quality ◽  
Recent Survey ◽  
New Professionals ◽  
Research Project ◽  
Audit Firm ◽  
Big 4 ◽  
Audit Firms ◽  
Labor Inputs

The main priority of the audit industry is to maintain and improve audit quality. While audit quality has been an important topic in both accounting academia and practice, there is still a lack of understanding of what drives audit quality. Given that people are the most valuable asset an audit firm has, we focus on examining the labor inputs as a driver of audit quality. Specifically, we argue that a key threat for audit quality that so far has been largely neglected is the loss of talent across the hierarchy. A well-known problem for audit firms is that they invest enormous resources in new professionals only to have many with talent leave (Patten, 1995; Vera-Muñoz, Ho & Chow, 2006; ACCA & ACRA, 2012). A recent survey by the Association of Chartered Certified Accountants finds that only about 38% are satisfied with their career and only 35% plan to stay beyond three years, with no significant differences across Big 4 and midtier firms (ACCA and ACRA, 2012).

scholarly journals Pengaruh Ukuran Perusahaan, Kualitas Audit Dan Profitabilitas Terhadap Kecepatan Waktu Dalam Penyampaian Laporan Keuangan

2018 ◽  
Vol 14 (1) ◽  
pp. 26-33
Author(s):  
Fitri Dwi Jayanti
Keyword(s):  
Logistic Regression ◽  
Audit Quality ◽  
Sampling Technique ◽  
Financial Statements ◽  
Company Size ◽  
Manufacturing Companies ◽  
Variable Size ◽  
Big Four ◽  
Public Accountant

This research aimed to examine the influence of the which consists company size, audit quality and profitability on the speed submission of financial statements in the manufacturing companies listed on the Indonesia Stock Excange (IDX) in 2013 to 2015. Purposive sampling technique is used to obtain the sample size by 66 manufacturing or 198 data in three years. To analyze hyphotesis this research used logistic regression with SPSS version 21.The result of this study showed that audit quality variabels measured by Public Accountant Office big four and non big four received or influenced the speed submission of financial statements while the variable size of the company and profitability hypothesis rejected or variable does not affect the speed submission of financial statements. Keywords: Company Size, Quality of KAP, Profitability, the speed submission of financial statements

Small Audit Firm Membership in Associations, Networks, and Alliances: Implications for Audit Quality and Audit Fees

2015 ◽  
Vol 91 (3) ◽  
pp. 767-792 ◽  
Author(s):  
Kenneth L. Bills ◽  
Lauren M. Cunningham ◽  
Linda A. Myers
Keyword(s):  
Audit Quality ◽  
Matched Control ◽  
Audit Fees ◽  
Discretionary Accruals ◽  
Audit Firm ◽  
Association Member ◽  
Big 4 ◽  
Audit Firms ◽  
Audit Fee ◽  
Control Samples

ABSTRACT In this study, we examine the benefits of membership in an accounting firm association, network, or alliance (collectively referred to as “an association”). Associations provide member accounting firms with numerous benefits, including access to the expertise of professionals from other independent member firms, joint conferences and technical trainings, assistance in dealing with staffing and geographic limitations, and the ability to use the association name in marketing materials. We expect these benefits to result in higher-quality audits and higher audit fees (or audit fee premiums). Using hand-collected data on association membership, we find that association member firms conduct higher-quality audits than nonmember firms, where audit quality is proxied for by fewer Public Company Accounting Oversight Board (PCAOB) inspection deficiencies and fewer financial statement misstatements, as well as less extreme absolute discretionary accruals and lower positive discretionary accruals. We also find that audit fees are higher for clients of member firms than for clients of nonmember firms, suggesting that clients are willing to pay an audit fee premium to engage association member audit firms. Finally, we find that member firm audits are of similar quality to a size-matched sample of Big 4 audits, but member firm clients pay lower fee premiums than do Big 4 clients. Our inferences are robust to the use of company size-matched control samples, audit firm size-matched control samples, propensity score matching, two-stage least squares regression, and to analyses that consider changes in association membership. Our findings should be of interest to regulators because they suggest that association membership assists small audit firms in overcoming barriers to auditing larger audit clients. In addition, our findings should be informative to audit committees when making auditor selection decisions, and to investors and accounting researchers interested in the relation between audit firm type and audit quality.

scholarly journals The Determinants of Audit Quality: A Study Using the Approach of Earnings Surprise Benchmark

2021 ◽  
Vol 4 (3) ◽  
pp. p16
Author(s):  
Reni Yendrawati ◽  
Arifin Praditya Putra ◽  
Rina Asmara
Keyword(s):  
Audit Quality ◽  
Stock Exchange ◽  
Time Budget ◽  
Sampling Technique ◽  
Probability Method ◽  
Manufacturing Companies ◽  
Analysis Method ◽  
Industry Specialization ◽  
Audit Firm ◽  
Time Budget Pressure

This study aims to find empirical evidence regarding the influence of audit tenure, audit firm rotation, audit firm industry specialization, and time budget pressure on audit quality. This research is a quantitative research using secondary data in the form of financial statements. This study uses a population of manufacturing companies in the consumer goods sector listed on the Indonesia Stock Exchange in 2015-2017. The sampling was done by using a non-probability method with a purposive sampling technique. The number of samples used in this study is 34 companies. The data analysis method used is a logistic regression analysis method using Statistical Package for Social Sciences (SPSS) version 21. The results of this study indicate that audit tenure and audit firm rotation have no effect on audit quality, PAF industry specialization has a positive effect on audit quality, time budget pressure has a negative effect on audit quality.

scholarly journals The effect of audit firm tenure in artificial rotation on audit quality

2015 ◽  
Vol 17 (3) ◽  
pp. 439
Author(s):  
Junaidi Junaidi ◽  
Harun Pamungkas Apriyanto ◽  
Nurdiono Nurdiono ◽  
Eko Suwardi
Keyword(s):  
Audit Quality ◽  
Stock Exchange ◽  
Audit Firm ◽  
Auditor Tenure ◽  
Audit Firms ◽  
Client Relationship ◽  
Going Concern Opinion ◽  
The Relationship

This study aimed to examine the effect of auditor tenure in artificial rotation on audit quality. Tenure shows the relationship between the audit firms and a client that is measured in years. Artificial rotation of auditor (audit firm) indicates a condition that, conceptually, there has been a change of auditors leading to the auditor relationship with the client to be disconnected, whereas substantive auditor-client relationship is ongoing. Formally, the auditor does not violate the rules and is still able to audit for the same client. Yet, in the long-term, it could affect the audit quality. The longer auditor tenure, the closer auditor-client relationship is. Thus, the auditor accommodates the interests of the client at the client's financial statements, including the practice of discretionary accruals as a proxy for audit quality. The samples were selected by purposive sampling method of the companies listed in Indonesia Stock Exchange from the year 2002-2010, with multiple linear regression approach. It shows that tenure, and total assets do not affect the quality of the audit while the size of the audit firm, and debt statistically have significant effect on audit quality. Future studies may extend the period of observation, and using other audit quality measures, such as fraud, and the propensity of auditor to issue going concern opinion..

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